UK economy shows tentative signs of Q1 recovery
LONDON: Britain's service sector rebounded in January after a snow-hit December and retail sales rose unexpectedly in March, data showed on Wednesday, raising hope of a decent pick-up in first-quarter GDP.
The pound rose and gilts fell on the data, as investors moved to price a more than 50 percent chance that the Bank of England would raise interest rates in May.
Investors believe the strength of first-quarter GDP data, due on April 27, will be crucial in determining the speed with which the Bank of England raises interest rates from their current historic low of 0.5 percent.
Services output grew by 1.3 percent on the month -- its fastest monthly expansion since July 2002 -- following a 1.1 percent decline in December, according to the Office for National Statistics.
All five sub-sectors contributed to the recovery, with hotels and restaurants up 4.4 percent on the month, transport up 1.7 percent, distribution up 1.4 percent, business services up 1.4 percent and government services up 0.7 percent.
The figures offer the first official glimpse of how the sector, which accounts for more than three-quarters of the Britain's economy, fared in the first quarter of the year.
"At face value it is quite robust," said Alan Clarke, UK economist at BNP Paribas. "Growth in January has made up for the terrible December, but it is still early days to gauge the strength of first-quarter growth."
GAUGING THE UNDERLYING TREND Gauging the strength of the recovery has been complicated by weather distortions following Britain's coldest December in a century.